Aave Leads Coalition Requesting $71M Frozen ETH Release for rsETH Recovery

Constitutional AIP Filed for Frozen ETH Release

A coalition of major DeFi protocols filed a Constitutional AIP on the Arbitrum forum Saturday morning requesting the network’s DAO release approximately $71 million in frozen ETH to support rsETH recovery efforts. Aave Labs is listed as the lead author, joined by Kelp DAO, LayerZero, EtherFi, and Compound, according to The Block.

The proposal seeks release of 30,765.67 ETH that the Arbitrum Security Council froze and moved on April 21 after tracing it to addresses controlled by the exploiter. With ETH trading near $2,317 at the time of filing, the frozen balance totaled just over $71.3 million, per The Block’s Ethereum Price page.

Fund Management and Governance Structure

Under the proposal, the funds would be sent to a 2-of-3 Gnosis Safe co-signed by Aave, Kelp DAO, and Certora, designated solely to receive recovered ETH and apply it toward restoring rsETH’s economic backing. If the coordinated recovery effort does not proceed as planned, the authors stated they will return to Arbitrum governance to determine an alternative use.

The proposal reiterates the size of the exploiter’s position on Aave: 89,567 rsETH supplied as collateral against 82,650 WETH and 821 wstETH borrowed across the protocol’s Ethereum Core and Arbitrum V3 markets. Aave emphasized that its smart contracts were not compromised and the incident originated outside the protocol.

49-Day Timeline and Community Concerns

Constitutional AIPs are Arbitrum’s highest-bar proposal type. The proposal estimates a timeline of roughly 49 days: a week of forum discussion, an optional one-week temperature check, a three-day voting delay, a 14- to 16-day onchain vote, an eight-day L2 waiting period, an L2-to-L1 message finalization step of typically at least a week, and a final three-day L1 wait before execution.

The extended timeline drew pushback within hours of filing. “Many parties have open positions on AAVE that might run into problem if they have to wait 49 days,” delegate Nicksta wrote in the first forum reply, asking whether the process could be expedited. Griff Green, an Arbitrum Security Council member, agreed and called for moving to a Snapshot vote “as soon as possible to validate the community’s intent and avoid unnecessary delays in unlocking these funds,” though he emphasized he was writing in his capacity as a delegate rather than a council member.

Green also flagged critical open questions before any onchain execution, including the expected outcome for Arbitrum users of Aave, the treatment of users who held rsETH before the exploit, and how losses would be socialized in the event of a partial recovery. The DAO should clearly communicate both full and partial recovery scenarios and the distribution plan under each, Green wrote.

Indemnification and DeFi United Contributions

The filing includes an extensive indemnification clause under which Aave Labs would commit to indemnify the Arbitrum Foundation, Offchain Labs, and each individual member of the Arbitrum Security Council from any claims arising out of the freeze or the proposed release. The agreement, governed by New York law, carries no cap, basket, or deductible, and would cover regulatory inquiries, tokenholder claims, and defense costs.

The 30,766 ETH would be the single largest line item in the running DeFi United recovery effort. Other contributions proposed to date include Aave’s own 25,000 ETH DAO commitment, Lido’s 2,500 stETH, and 5,000 ETH each from EtherFi and Aave founder Stani Kulechov. Mantle has separately proposed a 30,000 ETH credit facility to Aave to absorb any residual bad debt.

FAQ

What is the Constitutional AIP process and why does it take 49 days?

Constitutional AIPs are Arbitrum’s highest-bar proposal type, requiring multiple governance stages. The 49-day timeline includes forum discussion, optional temperature check, voting delays, onchain voting (14-16 days), L2 waiting period (8 days), L2-to-L1 message finalization (typically at least a week), and final L1 execution wait (3 days), according to the proposal.

What safeguards are in place for the released ETH?

The released funds would be sent to a 2-of-3 Gnosis Safe co-signed by Aave, Kelp DAO, and Certora, designated solely to receive recovered ETH and apply it toward restoring rsETH’s economic backing. If the recovery effort does not proceed as planned, the authors committed to return to Arbitrum governance for alternative use determination.

How much total ETH has been committed to rsETH recovery?

The 30,766 ETH from the frozen fund is the largest single contribution. Combined with other pledges—Aave’s 25,000 ETH, Lido’s 2,500 stETH, EtherFi’s 5,000 ETH, Stani Kulechov’s 5,000 ETH, and Mantle’s proposed 30,000 ETH credit facility—the recovery effort includes substantial commitments from multiple protocols, according to The Block.